Prepaid Cards - Prepaid Debit Cards

Prepaid and debit cards offer the convenience of a card without the hurdle of a credit check to get a card. Because money is debited directly from your account, these cards do not report to the major credit reporting agencies. The prepaid debit cards are not credit cards. Want to learn more about prepaid cards? Get helpful tips & advice from our experts.

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The Benefits of Prepaid Debit Cards

One of the newest and most successful financial products is the prepaid debit card. Millions of people have purchased these products for personal use, and their uses include payroll and allowance. There are dozens of prepaid cards on the market, all with different features and fee structures.

They all, however, have a few things in common. First, you don't need good credit to get one. You simply load money onto the card and then spend that money in much the same way as you would with a credit card or debit card linked to a bank account. Second, prepaid debit cards do not help users build credit since no one is lending you any money. So if you're looking for a tool to help you build your credit, this will not do the job. (Check out secured cards for that.) Back to top.

Who Should Consider Prepaid Debit Cards?

Prepaid cards are particularly appealing to people who can't get a bank account. The underbanked -- as they are often called -- often load their paychecks onto their prepaid cards and then use the cards as they would a bank debit card. Other people who may find prepaid cards appealing are those who frequently get hit with credit card fees for going over their credit limit or paying late. If you tend to make mistakes like these, a prepaid card may save you money in the long run. Although prepaid cards do have fees, over time they may not add up to as much as the over-limit and late fees. Back to top.

Prepaid vs. Gift Cards

Although you pay for a prepaid and a gift card before the money can be spent, prepaid debit cards and gift cards are not the same. Gift cards are covered by the Credit CARD Act, which limits fees; prepaid debit cards are not. Prepaid cards can be used anywhere that accepts the brand (Visa, MasterCard or American Express, for example) and are not merchant-specific, as gift cards often are.

Prepaid debit cards are reloadable, and you must register your card, giving your name and address. Gift cards do not require that users register their cards (though it's a good idea, as you may have some recourse if your card is lost or stolen) and cannot be reloaded. Back to top.

When to Use Prepaid Cards

In terms of making purchases, prepaid cards can be used like any other credit or ATM cards. If you're not sure if you should get a prepaid debit card to begin with because you don't know if your credit is good enough to qualify for a traditional credit card, then you can use a tool like Credit.com's free Credit Report Card. It provides a clear breakdown of your credit standing, along with your free credit scores. It will also match you with credit cards for which you are likely to qualify. You can also use a credit card comparison tool, like this one, and filter the results to show only credit cards that match your credit profile. You can even use the tool to search for prepaid cards. Once you have your results you'll be able to compare the cards' fees and features. Back to top.

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